Graft probe reaches into the highest levels of Austria’s government

For weeks, rumours circulated about who Austrian prosecutors might name next in a sprawling, high-level corruption probe.

Last Thursday morning, the investigation reached the highest levels of government when a squad of fraud police accompanied by forensic experts raided the house of the country’s finance minister, Gernot Blümel.

Blümel has now been formally named as a key suspect in a graft inquiry into the deep and complex relationships between Austrian lawmakers, senior officials and the Austrian gambling company Novomatic. 

Blümel is as close as anyone in Austrian politics to chancellor Sebastian Kurz. In the warrant that judges approved to raid Blümel’s house, the finance minister’s name appeared 23 times. It named Kurz 42 times, signalling where prosecutors may look next.

A political corruption scandal sank Kurz’s first government with the far-right in 2019. An equally mettlesome set of allegations — this time against allies in his own party — could prove just as damaging to his second.

The Novomatic case is a challenge to a leader whose political success was built on a promise of youth and reform — and an end to the cosy and sometimes nepotistic politics of Austria’s recent past.

Austrian finance minister Gernot Blümel holds a press conference in Vienna after the raid on his house © Lisi Niesner/Reuters

Revelations from the probe — and a parallel parliamentary inquiry — have shone an unflattering light on an enduring system of party-political patronage. It is so ingrained in Austrian politics that it has its own vocabulary: Parteibuchwirtschaft, or “party book economy”.

In their inquiry into Blümel, prosecutors said they were looking at whether in 2017 he agreed to help Novomatic lobby the Italian government for a €40m tax rebate, in exchange for political support in Austria. At the time, Blümel was a close confidant of Kurz, who was then Austria’s foreign minister.

Both Blümel and Novomatic have denied the allegations. However the escalating scandal has caught Kurz on the back foot, political analyst Thomas Hofer notes.

“This investigation has become a huge impediment for the government,” he said. “Blümel really is very close [to Kurz]. He’s inner circle . . . The last six weeks have been very tough.”

The year began for the Kurz’s government with the resignation of its labour minister in an embarrassing plagiarism scandal. Data meanwhile has showed the economy to be among the worst hit in Europe by the pandemic. And in early February, a damning official inquiry slated Austrian intelligence for failures that allowed a deadly terror attack to unfold in Vienna in November.

But the chancellor remains popular. Poll ratings for his Austrian People’s party have slipped from 40 per cent to 37 per cent over the past two months, but are still comfortably ahead of its nearest rivals.

Kurz’s calculation, according to chancellery officials, is that most Austrians see the scandal — widely known as the “Casinos Case” — as he does: politically motivated by partisan officials in law enforcement opposed to his political agenda. The evidence against Blümel, officials say, is flimsy at best.

This week Kurz has gone on the offensive, accusing prosecutors at the WKStA — the prosecuting bureau that ordered the raid on Blümel’s home — of over-reach.

“There have been so many lapses that I believe there is an urgent need for change there,” he said at a Tuesday press conference.

Of 40,000 named suspects in WKStA investigations in recent years, the chancellor noted, just 400 had been convicted. An abortive raid on Austria’s own intelligence agency earlier this year damaged relationships with key allies, he said.

Kurz and his ministers now say they want to create a new Federal Prosecutor’s office — akin to that in Switzerland and Germany — and sweep aside the WKStA altogether. Such a change would require a constitutional amendment, but is likely to be widely supported across the political spectrum. Even Kurz’s political opponents admit the existing system is prone to politicisation.

But the proposed reforms may not be enough to contain the bad headlines.

Dozens of other WKStA raids have taken place during the past few months on properties owned by former Novomatic employees. Other senior People’s party politicians, including former finance minister Hartwig Löger and the head of the country’s state holding company, Thomas Schmid, have also been named as suspects.

While Novomatic has denied improperly donating money to the People’s party, investigators are also looking at large sums of money the company gave to dozens of small party-affiliated satellite societies, clubs and think tanks.

“They’ve seized so much now that they basically have the full correspondence of the government — including everything that everyone sent privately on their own phones — over the past two years,” said one political consultant closely involved with the Novomatic probe.

In parallel to the WKStA’s efforts, a special investigatory committee in the Austrian parliament is also probing the case.

“It’s clear that a huge amount of political pressure is now being exerted on the corruption investigators, who are just trying to do their jobs,” said Stephanie Krisper, a parliamentarian for the liberal Neos party and a member of the investigatory committee. 

“We have quite the culture of corruption and secrecy in Austria. Due to legislation being kept weak, it’s very difficult to shed light on the flow of money to parties and organisations close to them.” 

Blümel was hauled in front of the committee last July. His testimony made headlines at the time when, in answer to more than 60 questions, the finance minister said he did not know or could not remember. 

“In most other countries I would have said he would have to resign,” said Krisper. 

“Not being able to remember over 60 times about events in the last two years paints a pretty bad picture of a finance minister. But perhaps it’s still a better picture than the one that would have emerged if he did.” 

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